Buffett more interested in yield than tax implications in Burger King deal

Billionaire investor Warren Buffett will help finance the marriage of Burger King (ticker: BKW) and Tim Hortons (THI) by purchasing preferred stock equal to about $3 billion, or 25% of the deal’s financing.

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Buffett, CEO of Berkshire Hathaway (BRK.A) has been an outspoken advocate for higher taxes on the wealthy, saying that he pays a lower tax rate than his secretary. He apparently isn’t concerned that the merger may result in Burger King paying corporate income taxes at the lower Canadian rate. Such so-called “inversions” have drawn fire from Congress and President Obama in recent weeks.

But Burger King says the tax savings will be minimal, and those aren’t what’s driving the merger. Tax savings will just be a percentage point or two, and Berkshire wouldn’t save any taxes through its investment.

The Buffett stake will take the form of preferred stock, which typically are non-voting shares. Companies must pay preferred dividends before they pay common stock dividends.

Berkshire will not participate in the operation or management of the combined company, according to the merger announcement. Buffett did not respond to a call asking for comment on the tax implications of the deal.

What probably interests Buffett most about the deal is the preferred stock’s dividend yield of 9%. Berkshire’s A shares have gained an average 8.1% a year the past decade.

Berkshire provided financing at similar levels for Goldman Sachs, General Electric and Bank of America through investments in preferred stocks, according to thestreet.com.